<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1995
---------------
Commission file number 0-13523
---------------
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
- ------------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Maryland 52-1328767
- ---------------------------------- ----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
11200 Rockville Pike, Rockville, Maryland 20852
- ----------------------------------------- ---------------------------------
(Address of principal executive officer) (Zip Code)
(301) 468-9200
- ------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at March 31, 1995
- -------------------------- -----------------------------------------------
(Not applicable) (Not applicable)
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995
Page
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Consolidated Balance Sheets - March 31, 1995 and
December 31, 1994 . . . . . . . . . . . . . 1
Consolidated Statements of Operations - for the
three months ended March 31, 1995 and 1994 2
Consolidated Statements of Cash Flows - for the
three months ended March 31, 1995 and 1994 3
Notes to Consolidated Financial Statements . 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . 9
PART II. Other Information
Item 3. Defaults upon Senior Securities . . . . . . . 12
Item 6. Exhibits and Reports on Form 8-K . . . . . . 13
Signature . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
Investments in and advances to
partnerships $ 35,495,801 $ 35,666,562
Investment in partnership held for sale -- 1,872,088
Cash and cash equivalents 6,984,306 5,435,555
Restricted cash or cash equivalents 114,200 114,200
Acquisition fees, principally paid to
related parties, net of accumulated
amortization of $352,960 and $344,501,
respectively 1,000,513 1,008,972
Property purchase costs, net of accu-
mulated amortization of $340,140 and
$332,102, respectively 945,944 953,982
Other assets 29,541 10,005
------------- -------------
Total assets $ 44,570,305 $ 45,061,364
============= =============
LIABILITIES AND PARTNERS' DEFICIT
Due on investments in partnerships,
net of unamortized discount on
purchase money notes of $25,803,687
and $31,401,005, respectively $ 24,864,464 $ 24,890,860
Accrued interest payable 76,147,359 76,148,263
Distributions payable 745,290 --
Accounts payable and accrued expenses 81,064 92,383
------------- -------------
Total liabilities 101,838,177 101,131,506
------------- -------------
Commitments and contingencies
Partners' capital (deficit):
Capital paid-in:
General Partners 2,000 2,000
Limited Partners 73,501,500 73,501,500
------------- -------------
73,503,500 73,503,500
Less:
Accumulated distributions to
The accompanying notes are an integral part
of these consolidated financial statements.
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
partners (3,452,583) (2,707,293)
Offering costs (7,562,894) (7,562,894)
Accumulated loss (119,755,895) (119,303,455)
------------- -------------
Total partners' deficit (57,267,872) (56,070,142)
------------- -------------
Total liabilities and partners'
deficit $ 44,570,305 $ 45,061,364
============= =============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
----------------------------
1995 1994
------------- ------------
<S> <C> <C>
Share of income (loss) from partnerships $ 225,735 $ (61,868)
------------- ------------
Other revenue and expenses:
Revenue:
Interest and other income 107,985 99,506
------------- -------------
Expenses:
Interest 3,662,918 2,899,611
Management fee 93,750 93,750
General and administrative 42,319 43,003
Professional fees 25,657 33,158
Amortization 16,692 18,302
------------- -------------
3,841,336 3,087,824
------------- -------------
Total other revenue and expenses (3,733,351) (2,988,318)
------------- -------------
Loss before gain on disposition of
investment in partnership (3,507,616) (3,050,186)
Gain on disposition of investment in
partnership 3,055,176 --
------------- -------------
Net loss (452,440) (3,050,186)
Accumulated losses, beginning of period (119,303,455) (104,314,483)
------------- -------------
Accumulated losses, end of period $(119,755,895) $(107,364,669)
============= =============
Loss allocated to General Partners (1.51%) $ (6,832) $ (46,058)
============= =============
Loss allocated to Initial and
Special Limited Partners (1.49%) $ (6,741) $ (45,448)
The accompanying notes are an integral part
of these consolidated financial statements.
-3-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
============= =============
Loss allocated to Additional Limited
Partners (97%) $ (438,867) $ (2,958,680)
============= =============
Loss per unit of Additional
Limited Partnership Interest based on
73,500 units outstanding $ (5.97) $ (40.25)
============= =============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-4-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (452,440) $ (3,050,186)
Adjustments to reconcile net loss to net
cash used in operating activities:
Share of (income) loss from
partnerships (225,735) 61,868
Decrease (increase) in accrued interest
receivable on advances to
partnerships 65,325 (12,141)
Amortization of deferred costs 16,692 18,302
Amortization of discount of purchase
money notes 924,053 459,124
Gain on disposition of investment in
partnership (3,055,176) --
Payment of purchase money note interest (222,967) (246,046)
Changes in assets and liabilities:
Increase in other assets (19,536) (2,543)
Increase in accrued interest payable 2,749,892 2,440,487
Decrease in accounts payable and
accrued expenses (11,319) (26,628)
------------ ------------
Net cash used in operating
activities (231,211) (357,763)
------------ ------------
Cash flows from investing activities:
Receipt of distributions from
partnerships 331,171 342,325
Net proceeds from disposition of
investment in partnership 1,495,721 --
------------ ------------
Net cash provided by investing
activities 1,826,892 342,325
------------ ------------
Cash used in financing activities:
Payment of purchase money note principal (46,930) --
------------ ------------
The accompanying notes are an integral part
of these consolidated financial statements.
-5-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
--------------------
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
Net increase (decrease) in cash and cash
equivalents 1,548,751 (15,438)
Cash and cash equivalents, beginning of
period 5,435,555 5,318,282
------------ ------------
Cash and cash equivalents, end of period $ 6,984,306 $ 5,302,844
============ ============
</TABLE>
The accompanying notes are an integral part
of these consolidated financial statements.
-6-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of C.R.I., Inc. (CRI), the Managing General Partner, the
accompanying unaudited consolidated financial statements of Capital Realty
Investors-IV Limited Partnership (the Partnership) contain all adjustments of a
normal recurring nature necessary to present fairly the Partnership's
consolidated financial position as of March 31, 1995 and December 31, 1994 and
the consolidated results of its operations for the three months ended March 31,
1995 and 1994 and its consolidated cash flows for the three months ended March
31, 1995 and 1994.
These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in consolidated financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted. While the Managing General Partner believes
that the disclosures presented are adequate to make the information not mis-
leading, it is suggested that these consolidated financial statements be read in
conjunction with the consolidated financial statements and the notes included in
the Partnership's Annual Report filed on Form 10-K for the year ended December
31, 1994.
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS
As of March 31, 1995, the Partnership's obligations with respect to its
investments in Local Partnerships, in the form of purchase money notes of
$50,668,151 (exclusive of unamortized discount on purchase money notes of
$25,803,687) plus accrued interest of $76,147,359, are payable upon the earlier
of (1) sale or refinancing of the respective Local Partnership's rental
property; (2) payment in full of the respective Local Partnership's permanent
loan; or (3) maturity. Purchase money notes in an aggregate principal amount of
$3,491,850 matured in 1994 but have not been paid, as discussed below. The
remaining purchase money notes mature from 1997 to 2000. The purchase money
note relating to Southgate Apartments Company (Southgate) totalling $2,767,000
was retired on January 31, 1995 as a result of the sale of the related property,
as discussed below. The purchase money notes are generally secured by the
Partnership's interest in the respective Local Partnerships. There is no
assurance that the underlying properties will have sufficient appreciation and
equity to enable the Partnership to pay the purchase money notes' principal and
accrued interest when due. If a purchase money note is not paid in accordance
with its terms, the Partnership will either have to renegotiate the terms of
repayment or risk losing its partnership interest in the Local Partnership. The
Managing General Partner is continuing to investigate possible alternatives to
reduce the Partnership's long-term debt obligations. These alternatives
include, among others, retaining the cash available for distribution to meet the
purchase money note requirements, buying-out certain purchase money notes at a
discounted price, extending the due dates of certain purchase money notes, or
refinancing the respective properties' underlying debt and using the proceeds to
pay-off or buy-down certain purchase money note obligations.
Interest expense on the Partnership's purchase money notes for the three
months ended March 31, 1995 and 1994 was $3,662,918 and $2,899,611,
respectively. Amortization of the imputed interest on purchase money notes
increased interest expense by $924,053 and $459,124 during the three months
ended March 31, 1995 and 1994, respectively.
-4-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
On May 11, 1992, Southgate Apartments Company filed a plan of action under
Title II of the Emergency Low Income Housing Preservation Act of 1987 to sell
the real estate to a non-profit entity. The sale was completed on January 31,
1995. The sale price of the property of approximately $9.3 million generated
sufficient proceeds to the Partnership to retire, at a discount, the purchase
money note obligation of the Partnership with respect to such property. The
sale provided proceeds to the Partnership in excess of its investment in the
Local Partnership, and resulted in a net financial statement gain and a net tax
gain in 1995 of $3,055,176 and $6,982,026, respectively. Additionally, the
General Partner and/or its affiliates received net fees for services of $186,512
on February 2, 1995. The Partnership distributed $745,290 (or $10.14 per
Additional Limited Partner unit)on April 28, 1995 to the Additional Limited
Partners as return of capital on a Generally Accepted Accounting Principles
basis. The Managing General Partner intends to retain all of the Partnership's
remaining undistributed net sale proceeds for the repayment, prepayment or
purchase of purchase money notes of other Local Partnerships, as discussed
above.
The Partnership defaulted on its purchase money note relating to Holiday
Village Apartments on July 27, 1994 when the note matured and was not paid.
The default amount included principal and accrued interest of $1,370,000 and
$2,862,342, respectively. As of May 4, 1995, principal and accrued interest
totalling $1,370,000 and $3,239,655, respectively, were due. In addition, the
Partnership defaulted on its purchase money note relating to Village Apartments
North on September 27, 1994 when the note matured and was not paid. The default
amount included principal and accrued interest of $1,180,000 and $1,450,907,
respectively. As of May 4, 1995, principal and accrued interest of $1,180,000
and $1,548,947, respectively, were due. In June 1994, an offer was made to
extend the maturity dates of these notes to coincide with the future sale of the
properties under the Low Income Housing Preservation and Resident Homeownership
Act of 1990 (LIHPRHA) program or refinancing of the first mortgages. As of
April 24, 1995, discussions with the noteholders were ongoing. There is no
assurance, however, that the offer to extend the maturity dates will be
accepted. The Partnership defaulted on its purchase money note relating to
Clearfield Hills I on October 30, 1994 when the note matured and was not paid.
The default amount included principal and accrued interest of $941,850 and
$892,717, respectively. As of May 4, 1995, principal and accrued interest
totalling $941,850 and $938,283, respectively, were due. In June 1994, an offer
was made to pay $100,000 in accrued interest and extend the maturity date to
September 30, 1996 to coincide with the potential completion of LIHPRHA
processing. As of April 24, 1995, discussions with the noteholders were
ongoing. There is no assurance that the offer to extend the maturity date will
be accepted. Should the noteholders begin foreclosure proceedings on the
Partnership's interest in the related Local Partnerships, the Partnership
intends to vigorously defend any action by the noteholders. However, there is
no assurance that the Partnership will be able to retain its interest in the
Local Partnerships. The uncertainty about the continued ownership of the
Partnership's interest in the related Local Partnerships does not impact the
Partnership's financial condition because the related purchase money notes are
non-recourse and collateralized solely by the Partnership's interest in the
Local Partnerships. Therefore, should the investment in Holiday Village
Apartments, Village Apartments North and Clearfield Hills I not produce
sufficient value to satisfy the related purchase money notes, the Partnership's
exposure to loss is limited since the amount of the non-recourse indebtedness
exceeds the carrying amount of the investment in and advances to the Local
-5-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
Partnerships. Thus, even a complete loss of these investments would not have a
material impact on the operations of the Partnership.
In 1989, Second Lakewood (Walden Apartments) was experiencing rent losses
due to units being taken off the market because of roof leakage. The Partnership
advanced a total of $750,000 during 1990 to fund roof replacement in order to
maintain the marketability and income of the property. The loan bears interest
at 11% and is to be repaid over a five-year period from the property's cash
flow. As of March 31, 1995 and December 31, 1994, $564,355 and $486,888,
respectively, had been repaid, comprised of $308,500 and $308,500 principal,
respectively, and $255,855 and $178,388 interest, respectively. Accrued interest
on the loan was $2,485 and $67,811 as of March 31, 1995 and December 31, 1994,
respectively.
The letter of credit related to the tax-exempt bonds on Lakes of Northdale
expires in June 1995. The Managing General Partner of Lakes of Northdale is
currently investigating the possibility of refunding the existing tax-exempt
bonds with the Florida Housing Finance Agency. There is no assurance that Lakes
of Northdale will obtain the necessary financing to refund the bonds. If new
financing is not obtained by June 1995, the bondholders could begin foreclosure
proceedings on the Local Partnership's property. The uncertainty about the
Local Partnership's continued ownership of the property does not impact the
Partnership's financial condition because the purchase money notes related to
Lakes of Northdale are non-recourse and collateralized solely by the
Partnership's interest in the Local Partnership. Therefore, should the
investment in Lakes of Northdale not produce sufficient value to satisfy the
related purchase money notes, the Partnership's exposure to loss is limited
since the amount of the non-recourse indebtedness exceeds the carrying amount of
the investment in and advances to the Local Partnership. Thus, even a complete
loss of this investment would not have a material impact on the operations of
the Partnership.
Many of the rental properties owned by the Local Partnerships have
mortgages which were federally insured under Section 236 or Section 221(d)(3) of
the National Housing Act, as amended. These properties may be eligible for sale
or refinancing, subject to numerous requirements, under the LIHPRHA program.
This program may provide incentives to owners of qualifying multifamily housing
who commit to permanently maintain their properties as low- to moderate-income
housing. Incentives available under LIHPRHA include selling the property to
qualified buyers or obtaining supplemental financing for the property. As of
April 24, 1995, members of Congress are recommending substantial changes to the
LIHPRHA program ranging from the elimination of the program to redesigning the
program. Substantial doubt exists as to whether any properties which have
already filed the notice of intent to participate under LIHPRHA will qualify
under a redesigned program, or whether the program will continue at all.
Many of the rental properties owned by the Local Partnerships are dependent
on the receipt of housing assistance payments guaranteed by contract under the
Housing and Urban Development (HUD) Section 8 program. The level of funding for
the Section 8 program, and HUD insured multifamily housing in general, is
dependent upon the continuation of appropriations approved by Congress for
subsidy payments. In the event that the rental subsidy programs are reduced or
phased out, there is no assurance that the rental properties will be able to
maintain the occupancy levels necessary to pay debt service and operating costs
or that the rents necessary to pay debt service and operating costs will be
-6-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
2. INVESTMENTS IN AND ADVANCES TO PARTNERSHIPS - Continued
competitive with rents for comparable units in the rental properties' market
areas. While the Managing General Partner has no reason to believe that HUD
will not honor its obligations under the contracts, some uncertainty exists in
light of the recent Congressional scrutiny of appropriations for HUD programs.
The following are combined statements of operations for the Local
Partnerships in which the Partnership has invested. The statements are compiled
from information supplied by the management agents of the projects and are
unaudited.
COMBINED STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
---------------------------------
1995 1994
------------ ------------
<S> <C> <C>
Revenue:
Rental revenue $ 9,863,573 $ 9,834,133
Other 501,520 450,431
------------ ------------
10,365,093 10,284,564
------------ ------------
Expenses:
Operating 6,289,673 6,367,296
Interest 2,173,033 2,324,315
Depreciation and
amortization 2,048,523 2,057,860
------------ ------------
10,511,229 10,749,471
------------ ------------
Net loss $ (146,136) $ (464,907)
============ ============
</TABLE>
As of March 31, 1995 and December 31, 1994, the Partnership's share of
cumulative losses to date for twelve and eleven, respectively, of the forty-
three and forty-four Local Partnerships, respectively, exceeds the amount of the
Partnership's investments in and advances to those Local Partnerships by
$13,984,922 and $13,617,817, respectively. As the Partnership has no further
obligation to advance funds or provide financing to these Local Partnerships,
the excess losses have not been reflected in the accompanying consolidated
financial statements.
3. RELATED PARTY TRANSACTIONS
In accordance with the terms of the Partnership Agreement, the Partnership
is obligated to reimburse the Managing General Partner for its direct expenses
-7-
<PAGE>
CAPITAL REALTY INVESTORS-IV LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. RELATED PARTY TRANSACTIONS - Continued
in managing the Partnership and to pay an annual incentive management fee
(Management Fee), after all other expenses of the Partnership are paid. The
Partnership paid $24,676 and $25,193 for the three months ended March 31, 1995
and 1994, respectively, as direct reimbursement of expenses incurred on behalf
of the Partnership. Additionally, the Partnership paid the Managing General
Partner a Management Fee of $93,750 for each of the three months periods ended
March 31, 1995 and 1994.
From April 1990 to January 1994, CRICO Management Corporation (CRICO), an
affiliate of the Managing General Partner, provided consulting, accounting and
other services to Walden Apartments. Fees paid or accrued to CRICO for these
services amounted to $8,217 for the month ended January 31, 1994. On February
1, 1994, CRICO contributed its consulting contracts and personnel to CAPREIT
Residential Corporation (CAPREIT). CAPREIT was formed by CRI but is not
currently owned or controlled by CRI and/or its affiliates. On April 12, 1995,
HUD approved CAPREIT as the new management agent.
-8-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Financial Condition/Liquidity
----------------------------
The Partnership's liquidity, with unrestricted cash resources of $6,984,306
and $5,435,555 as of March 31, 1995 and December 31, 1994, respectively, along
with anticipated future cash distributions from the Local Partnerships, is
expected to meet its current and anticipated operating cash needs. As of March
31, 1995, $114,200 of cash equivalents are restricted for (1) the purpose of
collateralizing a letter of credit for a certain Local Partnership and (2)
future interest payments on one of the purchase money notes. As of April 24,
1995, there are no material commitments for capital expenditures.
As of March 31, 1995, the Partnership's obligations with respect to its
investments in Local Partnerships, in the form of purchase money notes of
$50,668,151 (exclusive of unamortized discount on purchase money notes of
$25,803,687) plus accrued interest of $76,147,359, are payable upon the earlier
of (1) sale or refinancing of the respective Local Partnership's rental
property; (2) payment in full of the respective Local Partnership's permanent
loan; or (3) maturity. Purchase money notes in an aggregate principal amount of
$3,491,850 matured in 1994 but have not been paid, as discussed below. The
remaining purchase money notes mature from 1997 to 2000. The purchase money
note relating to Southgate Apartments Company (Southgate) totalling $2,767,000
was retired on January 31, 1995 as a result of the sale of the related property,
as discussed below. The purchase money notes are generally secured by the
Partnership's interest in the respective Local Partnerships. There is no
assurance that the underlying properties will have sufficient appreciation and
equity to enable the Partnership to pay the purchase money notes' principal and
accrued interest when due. If a purchase money note is not paid in accordance
with its terms, the Partnership will either have to renegotiate the terms of
repayment or risk losing its partnership interest in the Local Partnership. The
Managing General Partner is continuing to investigate possible alternatives to
reduce the Partnership's long-term debt obligations. These alternatives
include, among others, retaining the cash available for distribution to meet the
purchase money note requirements, buying-out certain purchase money notes at a
discounted price, extending the due dates of certain purchase money notes, or
refinancing the respective properties' underlying debt and using the proceeds to
pay-off or buy-down certain purchase money note obligations.
On May 11, 1992, Southgate Apartments Company filed a plan of action under
Title II of the Emergency Low Income Housing Preservation Act of 1987 to sell
the real estate to a non-profit entity. The sale was completed on January 31,
1995. The sale price of the property of approximately $9.3 million generated
sufficient proceeds to the Partnership to retire, at a discount, the purchase
money note obligation of the Partnership with respect to such property. The
sale provided proceeds to the Partnership in excess of its investment in the
Local Partnership, and resulted in a net financial statement gain and a net tax
gain in 1995 of $3,055,176 and $6,982,026, respectively. Additionally, the
General Partner and/or its affiliates received net fees for services of $186,512
on February 2, 1995. The Partnership distributed $745,290 (or $10.14 per
Additional Limited Partner unit)on April 28, 1995 to the Additional Limited
Partners as return of capital on a Generally Accepted Accounting Principles
basis. The Managing General Partner intends to retain all of the Partnership's
remaining undistributed net sale proceeds for the repayment, prepayment or
purchase of purchase money notes of other Local Partnerships, as discussed
above.
-9-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
The Partnership defaulted on its purchase money note relating to Holiday
Village Apartments on July 27, 1994 when the note matured and was not paid.
The default amount included principal and accrued interest of $1,370,000 and
$2,862,342, respectively. As of May 4, 1995, principal and accrued interest
totalling $1,370,000 and $3,239,655, respectively, were due. In addition, the
Partnership defaulted on its purchase money note relating to Village Apartments
North on September 27, 1994 when the note matured and was not paid. The default
amount included principal and accrued interest of $1,180,000 and $1,450,907,
respectively. As of May 4, 1995, principal and accrued interest of $1,180,000
and $1,548,947, respectively, were due. In June 1994, an offer was made to
extend the maturity dates of these notes to coincide with the future sale of the
properties under the Low Income Housing Preservation and Resident Homeownership
Act of 1990 (LIHPRHA) program or refinancing of the first mortgages. As of
April 24, 1995, discussions with the noteholders were ongoing. There is no
assurance, however, that the offer to extend the maturity dates will be
accepted. The Partnership defaulted on its purchase money note relating to
Clearfield Hills I on October 30, 1994 when the note matured and was not paid.
The default amount included principal and accrued interest of $941,850 and
$892,717, respectively. As of May 4, 1995, principal and accrued interest
totalling $941,850 and $938,283, respectively, were due. In June 1994, an offer
was made to pay $100,000 in accrued interest and extend the maturity date to
September 30, 1996 to coincide with the potential completion of LIHPRHA
processing. As of April 24, 1995, discussions with the noteholders were
ongoing. There is no assurance that the offer to extend the maturity date will
be accepted. Should the noteholders begin foreclosure proceedings on the
Partnership's interest in the related Local Partnerships, the Partnership
intends to vigorously defend any action by the noteholders. However, there is
no assurance that the Partnership will be able to retain its interest in the
Local Partnerships. The uncertainty about the continued ownership of the
Partnership's interest in the related Local Partnerships does not impact the
Partnership's financial condition because the related purchase money notes are
non-recourse and collateralized solely by the Partnership's interest in the
Local Partnerships. Therefore, should the investment in Holiday Village
Apartments, Village Apartments North and Clearfield Hills I not produce
sufficient value to satisfy the related purchase money notes, the Partnership's
exposure to loss is limited since the amount of the non-recourse indebtedness
exceeds the carrying amount of the investment in and advances to the Local
Partnerships. Thus, even a complete loss of these investments would not have a
material impact on the operations of the Partnership.
The Partnership closely monitors its cash flow and liquidity position in an
effort to ensure that sufficient cash is available for operating requirements.
For the three months ended March 31, 1995, the receipt of distributions from
Local Partnerships was adequate to support operating cash requirements. Cash and
cash equivalents increased for the three months ended March 31, 1995 primarily
due to the net proceeds from the sale of Southgate, as discussed above.
Results of Operations
---------------------
The Partnership's net loss for the three months ended March 31, 1995
decreased from the corresponding period in 1994 primarily due to the gain on
disposition of the Southgate property, as discussed above. Contributing to the
decrease in net loss was an increase in share of income from Local Partnerships
principally due to increased rental and other income at three properties
resulting from higher rental subsidies and increased occupancy. Partially
-10-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
offsetting the decrease in the Partnership's net loss was an increase in
interest expense as a result of the amortization of imputed interest.
For financial reporting purposes, the Partnership, as a limited partner in
the Local Partnerships, does not record losses from the Local Partnerships in
excess of its investment to the extent the Partnership has no further obligation
to advance funds or provide financing to the Local Partnerships. As a result,
the Partnership's recognized losses for the three months ended March 31, 1995
did not include losses of $367,105 compared to excluded losses of $396,387 for
the three months ended March 31, 1994.
In 1989, Second Lakewood (Walden Apartments) was experiencing rent losses
due to units being taken off the market because of roof leakage. The Partnership
advanced a total of $750,000 during 1990 to fund roof replacement in order to
maintain the marketability and income of the property. The loan bears interest
at 11% and is to be repaid over a five-year period from the property's cash
flow. As of March 31, 1995 and December 31, 1994, $564,355 and $486,888,
respectively, had been repaid, comprised of $308,500 and $308,500 principal,
respectively, and $255,855 and $178,388 interest, respectively. Accrued interest
on the loan was $2,485 and $67,811 as of March 31, 1995 and December 31, 1994,
respectively.
The letter of credit related to the tax-exempt bonds on Lakes of Northdale
expires in June 1995. The Managing General Partner of Lakes of Northdale is
currently investigating the possibility of refunding the existing tax-exempt
bonds with the Florida Housing Finance Agency. There is no assurance that Lakes
of Northdale will obtain the necessary financing to refund the bonds. If new
financing is not obtained by June 1995, the bondholders could begin foreclosure
proceedings on the Local Partnership's property. The uncertainty about the
Local Partnership's continued ownership of the property does not impact the
Partnership's financial condition because the purchase money notes related to
Lakes of Northdale are non-recourse and collateralized solely by the
Partnership's interest in the Local Partnership. Therefore, should the
investment in Lakes of Northdale not produce sufficient value to satisfy the
related purchase money notes, the Partnership's exposure to loss is limited
since the amount of the non-recourse indebtedness exceeds the carrying amount of
the investment in and advances to the Local Partnership. Thus, even a complete
loss of this investment would not have a material impact on the operations of
the Partnership.
Many of the rental properties owned by the Local Partnerships have
mortgages which were federally insured under Section 236 or Section 221(d)(3) of
the National Housing Act, as amended. These properties may be eligible for sale
or refinancing, subject to numerous requirements, under the LIHPRHA program.
This program may provide incentives to owners of qualifying multifamily housing
who commit to permanently maintain their properties as low- to moderate-income
housing. Incentives available under LIHPRHA include selling the property to
qualified buyers or obtaining supplemental financing for the property. As of
April 24, 1995, members of Congress are recommending substantial changes to the
LIHPRHA program ranging from the elimination of the program to redesigning the
program. Substantial doubt exists as to whether any properties which have
already filed the notice of intent to participate under LIHPRHA will qualify
under a redesigned program, or whether the program will continue at all.
Many of the rental properties owned by the Local Partnerships are dependent
on the receipt of housing assistance payments guaranteed by contract under the
-11-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
Housing and Urban Development (HUD) Section 8 program. The level of funding for
the Section 8 program, and HUD insured multifamily housing in general, is
dependent upon the continuation of appropriations approved by Congress for
subsidy payments. In the event that the rental subsidy programs are reduced or
phased out, there is no assurance that the rental properties will be able to
maintain the occupancy levels necessary to pay debt service and operating costs
or that the rents necessary to pay debt service and operating costs will be
competitive with rents for comparable units in the rental properties' market
areas. While the Managing General Partner has no reason to believe that HUD
will not honor its obligations under the contracts, some uncertainty exists in
light of the recent Congressional scrutiny of appropriations for HUD programs.
No other significant changes in the Partnership's operations have taken
place during this period.
PART II. OTHER INFORMATION
-----------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
-------------------------------
The Partnership defaulted on its purchase money note relating to Holiday
Village Apartments on July 27, 1994 when the note matured and was not paid.
The default amount included principal and accrued interest of $1,370,000 and
$2,862,342, respectively. As of May 4, 1995, principal and accrued interest
totalling $1,370,000 and $3,239,655, respectively, were due. In addition, the
Partnership defaulted on its purchase money note relating to Village Apartments
North on September 27, 1994 when the note matured and was not paid. The default
amount included principal and accrued interest of $1,180,000 and $1,450,907,
respectively. As of May 4, 1995, principal and accrued interest of $1,180,000
and $1,548,947, respectively, were due. In June 1994, an offer was made to
extend the maturity dates of these notes to coincide with the future sale of the
properties under the Low Income Housing Preservation and Resident Homeownership
Act of 1990 (LIHPRHA) program or refinancing of the first mortgages. As of
April 24, 1995, discussions with the noteholders were ongoing. There is no
assurance, however, that the offer to extend the maturity dates will be
accepted. The Partnership defaulted on its purchase money note relating to
Clearfield Hills I on October 30, 1994 when the note matured and was not paid.
The default amount included principal and accrued interest of $941,850 and
$892,717, respectively. As of May 4, 1995, principal and accrued interest
totalling $941,850 and $938,283, respectively, were due. In June 1994, an offer
was made to pay $100,000 in accrued interest and extend the maturity date to
September 30, 1996 to coincide with the potential completion of LIHPRHA
processing. As of April 24, 1995, discussions with the noteholders were
ongoing. There is no assurance that the offer to extend the maturity date will
be accepted. Should the noteholders begin foreclosure proceedings on the
Partnership's interest in the related Local Partnerships, the Partnership
intends to vigorously defend any action by the noteholders. However, there is
no assurance that the Partnership will be able to retain its interest in the
Local Partnerships. The uncertainty about the continued ownership of the
Partnership's interest in the related Local Partnerships does not impact the
Partnership's financial condition because the related purchase money notes are
non-recourse and collateralized solely by the Partnership's interest in the
Local Partnerships. Therefore, should the investment in Holiday Village
Apartments, Village Apartments North and Clearfield Hills I not produce
sufficient value to satisfy the related purchase money notes, the Partnership's
-12-
<PAGE>
PART II. OTHER INFORMATION
-----------------
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - Continued
-------------------------------
exposure to loss is limited since the amount of the non-recourse indebtedness
exceeds the carrying amount of the investment in and advances to the Local
Partnerships. Thus, even a complete loss of these investments would not have a
material impact on the operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
No reports on Form 8-K were filed with the Commission during the quarter
ended March 31, 1995.
All other items are not applicable.
-13-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CAPITAL REALTY INVESTORS-IV
LIMITED PARTNERSHIP
(Registrant)
By: C.R.I., Inc.
Managing General Partner
May 4, 1995 /s/ Richard J. Palmer
- -------------------- ------------------------------
Date Richard J. Palmer
Senior Vice President/Finance
Signing on behalf of the Registrant and as
Principal Accounting Officer
-14-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE FIRST QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 6,984,306
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 44,570,305
<CURRENT-LIABILITIES> 0
<BONDS> 101,011,823
<COMMON> 0
0
0
<OTHER-SE> (57,267,872)
<TOTAL-LIABILITY-AND-EQUITY> 44,570,305
<SALES> 0
<TOTAL-REVENUES> 333,720
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 178,418
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,662,918
<INCOME-PRETAX> (3,507,616)
<INCOME-TAX> 0
<INCOME-CONTINUING> (3,507,616)
<DISCONTINUED> 0
<EXTRAORDINARY> 3,055,176
<CHANGES> 0
<NET-INCOME> (452,440)
<EPS-PRIMARY> (5.97)
<EPS-DILUTED> (5.97)
</TABLE>
